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Economy in Brief

U.S. January Personal Savings Rate Highest Since 1995
by Tom Moeller March 2, 2009

The personal & outlays report from the U.S. Bureau of Economic Analysis indicated that the savings rate continued its recent improvement. During January, individuals pared spending against the background of the current economic uncertainties and the personal savings rate rose to 5.0%, up from the monthly low of 0.0% reached last April. The saving rate averaged less than 1.0% from 2005 to 2007.

The personal income & consumption figures are available in Haver's USECON and USNA databases.

Life expectancy and old age savings from the Federal Reserve Bank of Chicago can be found here

Personal consumption expenditures did rise last month, but the 0.6% increase was the first monthly increase since last June. The figure was slightly better than expectations for a 0.4% increase. Nevertheless, the three-month annualized rate of growth of -4.9% followed even more negative growth rates during the prior three months. The recent figures have been very much influenced by the change in energy prices. Real personal spending rose 0.4% during January and three-month growth amounted to 0.7%. The latest monthly increase was only the second since May.

Real spending on discretionary items continued weak. Motor vehicle & parts purchases fell 0.8% in January after a 13.3% decline during all of last year. Real spending on household furniture & appliances rose a moderate 0.6% and it has been flat since last summer while real spending on apparel fell 0.5% (-2.7% year-to-year.

The pullback in personal spending continues to reflect the weakness in personal income. Though it rose 0.4% last month, it was the first monthly increase since September and the three month growth rate stood at -1.0%. The latest monthly figure was better than expectations for a 0.2% monthly decline. Disposable personal income also firmed and rose 1.7% last month (4.0% y/y) thanks to a 9.3% monthly drop in taxes. Real disposable income growth increased by 1.5% last month (3.3% y/y).

Wages & salaries continued to move lower last month. Declines in employment levels dropped wage income by 0.2% during January and at a 3.3% rate during the last three months. That was the weakest growth rate since 2004. Private sector wages fell at a 5.2% rate during those three months while government sector wages remained immune to the recession and rose at a 5.9% annual rate.

Lower interest rates caused another decline in interest income which is down at a 17.6% annual rate during the last three months. Dividend income also fell at a 3.7% annual rate during that three-month period as corporate profits fell.

The PCE chain price index continued to reflect the weakness in income & spending and rose just 0.2%. Prices rose 0.7% year-to-year, held back by the decline in energy prices. Core power logged just a 0.1% rise following the slight decline in December. The dip matched Consensus expectations. Durable goods prices fell 0.1% (-1.9% y/y).

The U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan can be found here.

Disposition of Personal Income (%)  January December Y/Y 2008 2007 2006
Personal Income 0.4 -0.2 1.9 3.8 6.1 7.1
  Disposable Personal Income 1.7 -0.2 4.0 4.7 5.5 6.4
Personal Consumption Expenditures 0.6 -1.0 -1.0 3.6 5.5 5.9
Saving Rate 5.0 3.9 0.1 (Jan. 08) 1.8 0.5 0.7
PCE Chain Price Index 0.2 -0.5 0.7 3.3 2.6 2.8
  Less food & energy 0.1 -0.0 1.6 2.2 2.2 2.3
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